Retail investors aggressively bought the dip following last week’s software-led market selloff, according to new analysis from JPMorgan. The quantitative strategists at the investment bank examined recent trading patterns and found that retail trader flows surged significantly above daily averages after pulling back during the initial downturn. This retail investor activity was primarily concentrated in ETFs rather than individual stocks, marking a notable shift in dip-buying behavior.
The analysis reveals that retail buying hit a year-to-date low on February 5 during the software sector meltdown. However, from Friday, February 6, through Wednesday, February 11, retail investor flows jumped sharply, driven largely by exchange-traded fund purchases. JPMorgan’s research also identified specific stocks experiencing an imbalance between retail and institutional interest, which could signal unexpected flows ahead.
Software Stocks Attract Retail Dip-Buyers
Following the software sector’s descent into bear market territory, retail investors targeted high-quality artificial intelligence plays, according to JPMorgan. Microsoft emerged as one of the primary beneficiaries of this retail dip-buying activity. The bank noted that Microsoft is among its “AI-Resilient” software stock picks, aligning retail sentiment with institutional recommendations.
Palantir and AppLovin also ranked among the top software names that retail investors purchased in 2026, alongside Microsoft. In contrast, Salesforce, Roper Technologies, and Intuit experienced significant selling pressure from retail traders during the same period. Beyond the immediate post-selloff recovery, retail investors have broadly favored media and semiconductor stocks over software companies since the start of 2026.
Mixed Retail Response to Magnificent Seven Earnings
Retail sentiment regarding Big Tech’s artificial intelligence spending plans remained divided following recent earnings reports, JPMorgan said, citing Reddit comments as evidence. While some retail investors shared Wall Street’s concerns about elevated AI capital expenditures, others viewed post-earnings declines as buying opportunities. This divergence in retail investor opinion highlighted varying perspectives on the long-term value of aggressive AI investments.
The analysts found that retail traders bought shares of Amazon and Alphabet following their post-earnings dips, viewing the weakness as attractive entry points. However, retail investors largely avoided Meta stock despite its climb after reporting results. This selective approach to Magnificent Seven stocks demonstrates that retail investors are becoming more discerning about which tech giants warrant dip-buying activity.
Hedge Fund Shorts Clash with Retail Buying
JPMorgan flagged several socially trending stocks where retail buying directly conflicts with hedge fund short positions. The bank highlighted that this combination of social media popularity and opposing institutional and retail flows creates potential for unexpected price movements. Such imbalances often lead to heightened volatility as competing interests battle for direction.
In the past week, Hims and Hers along with Strategy stood out as stocks experiencing significant divergence between retail buying pressure and hedge fund shorting activity. Additionally, retail trading activity has shifted toward ETFs compared to single stocks, representing a change in how individual investors are deploying capital during market volatility. This preference for diversified exposure through funds rather than concentrated bets on individual companies may reflect growing caution among retail participants.
Market observers will continue monitoring whether retail investors maintain their dip-buying appetite if volatility persists or if another leg down in software stocks prompts a more defensive posture. The sustainability of this retail buying trend remains uncertain as economic conditions and corporate earnings guidance evolve throughout 2026.
